To Encourage Consumption of a Good That Generates Positive Externalities

question 152

Multiple Choice

To encourage consumption of a good that generates positive externalities, the best option for policymakers would be to:

• A) impose a tax on the amount consumed to achieve the socially optimal level.
• B) mandate consumption of the good at the socially optimal level.
• C) provide a subsidy per unit of the good consumed to achieve the socially optimal level.
• D) do nothing, since the market will achieve the socially optimal level without government intervention.

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